I've recently looked a variety of higher-yielding individual dividend stocks, but here are some promising dividend ETFs for those looking for a core position of, say, two to four good income ETFs.
SPDR S&P Dividend ETF (SDY)
This fund aims to correspond with the S&P High Yield Dividend Aristocrat Index's total returns.
All holdings must have increased their dividends for at least 20 years, and the ETF weights the portfolio based on yields (higher-yielding stocks make up a higher percentage of total holdings). As such, industries that account for the portfolio's largest share include consumer staples, financials, utilities and industrials.
The fund has a 0.35% expense ratio and offers two types of distributions - dividends and capital gains (which management distributes in the fourth quarter). All told, SDY currently yields slightly over 5%.
iShares Interest-Rate-Hedged High-Yield Bond ETF (HYGH)
Investors love high-yield bonds' high yields, but hate their volatility and risk. To solve this problem, consider buying the iShares Interest-Rate-Hedged High-Yield Bond ETF.
This ETF has one holding -- the iShares iBoxx U.S. Dollar High Yield Corporate Bond ETF (HYG) , but the "H" in "HYGH" stands for "Hedged." That means the fund also shorts a certain percentage of Treasury futures to offset any potential losses.
That might sound complex, but is actually a standard risk-management tool for fixed- income investing. HYGH has slightly higher fees as a result (1.14%), but the ETF still manages to yield 5.37%.
iShares Emerging-Markets Dividend ETF (DVYE)
You can add a little international exposure to your portfolio with the iShares Emerging-Markets Dividend ETF, which seeks to track the investment results of an index composed of relatively high-dividend equities in emerging markets.
DVYE's largest holdings are from China, Russia, Qatar and Taiwan, and the fund's largest sector exposure is to utilities, real estate, information technology and financials. The ETF currently has a 0.45% expense ratio and a 4.63% yield.
Invesco KBW Premium Yield Equity REIT ETF (KBWY)
Finally, let's add some real estate to the mix in the form of Invesco's Premium Yield Equity REIT.
This ETF invests in small- and medium-sized real estate investment trusts, with about 58% of the portfolio in small-cap value names and 24% in mid-cap value. KBWY's largest holdings are Washington Prime Group (WPG) , New Senior Investment Group (SNR) , Government Properties Income Trust (GOV) and Global Net Lease Inc. (GNL) .
The fund has a little more than $400 million in assets under management, a low expense ratio (0.35%) and a 7.58% current yield.
The Bottom Line
The ETFs above can help you build a portfolio that combines U.S. and global dividend stocks with exposure to hedged high-yield bonds and some REITs.
This can give you diversity while also providing solid yields. If you allocate 25% of your portfolio to each ETF above, you'll have a portfolio that currently yields 5.64% -- not bad for today's low-rate environment.
(This article was sent July 9 to subscribers of TheStreet's Income Seeker, a product presenting the world of opportunities in fixed income and dividend stocks. Click here to learn more about Income Seeker and to receive articles like this each day from Nick McCullum, Hale Stewart, Peter Tchir, Jonathan Heller and others.)